Best Alternative Business Loans for Minorities Feature Comparison
Alternative business loans allow entrepreneurs to access resources such as loans and other financial tools much earlier in their businesses lifecycle than if they tried to work with traditional lenders. Entrepreneurs are better able to address unexpected growth and the financial investments needed to manage those moments in their business.
The chart below sheds some insight into how quickly entrepreneurs in solid financial standing can work with one or more of the organizations listed below.
|Min. Credit Score
||Min. Time in Business
||Min. Annual Revenue
||Loan Amount (Maximum)|
||Not Available, but Funding Circle seems to prefer higher annual revenues than other companies in this table
|$12,000 minimum in gross sales
U.S. Small Business Administration (SBA) Loans for Minorities
The SBA provides comprehensive and unique resources to help all small businesses succeed. However, the SBA also has developed some additional services focused on creating an eco-system for the healthy development of minority run businesses.
This support includes mentorship, building entrepreneurial communities and funding for the different underserved communities seeking their support.
- SBA 7(a)-This program has the goal of funding small businesses up to a maximum of $350,000. A unique feature is the speed in processing and approval of applications.
- SBA Community Advantage Loans-Established in 2011, the SBA Community Advantage Loan program has the goal of increasing underserved communities’ access to credit.
- SBA Microloan Program-Lending intermediaries work with smaller businesses needing funding. The maximum loaned out via this program is $50,000 and borrowers are able to use the funds as needed with the exception of paying off debts or making real estate purchases.
- HubZone Contract Program that is focused on providing up to 3% of Federal Contracts to underserved communities.
It’s important to note that the SBA partners with lending organizations that work with minority-run businesses at the local level instead of offering unique loans designed specifically with minority entrepreneurs in mind.
Nonprofit Loans and Other Lending Programs
Minority business owners aren’t limited to seeking funding from traditional financial institutions such as banks or online service providers. There are numerous local, national, non-profit and for profit organizations designed to support unique communities through thoughtfully designed resources that traditional lenders might not be able to provide.
Union Bank’s Business Diversity Lending This organization works with underserved communities by providing a variety of loan and banking products. Qualified customers can receive up to $2.5 million in funding and Union Bank provides Minority Business Certification assistance through its certification center, a key component to proving a business is minority owned.
Accion-This organization focuses on providing inclusive financial services and partnerships. Accion helps small businesses around the globe via equity investments, business advising and partnerships.
Kiva-For businesses looking for a crowdfunding platform to fund their business, Kiva provides comprehensive support for micro entrepreneurs. Kiva has a global audience but also provides services for US based entrepreneurs. For individuals looking to donate and lend funds to entrepreneurs, Kiva borrowers have a 96% repayment rate.
The Business Consortium Fund (BCF) This fund is part of the National Minority Supplier Development Council. The Fund makes available microloans that range between $10,000-$75,000 for qualified businesses. Loaned funds can only be used in ways that are determined by BCF.
Indian Loan Guarantee Program-This program is available to enrolled members of tribes in the United States. In addition to being an enrolled member of a tribe, the company seeking funds must be at least 51% minority owned with a specific focus on elevating and uplifting Native American Communities through the services provided by the company.
Community Development Financial Institution Loans (CDFI)-CDFI patterns with financial institutions across the United States. Currently, there are a little over 1,000 member institutions that make on the ground lending decisions that are unique to the communities that each partner serves.
Accompany Capital-Immigrant and refugee entrepreneurs face an uphill battle in establishing credit, access to resources and receiving funding. Accompany Capital helps these unique groups gain access to credit via microloans, lines of credit and small business loans.
U.S. Department of Agriculture (USDA) Business and Industry Loan-This program partners with financial institutions who will then distribute and loan these funds to applicants who meet a predetermined criteria. Applicants’ projects should be based in a rural location. The Business and Industry Loan is not specifically targeted towards minority business owners.
What is a minority-owned business?
In order to be designated a minority owned business, there is a very straightforward threshold. A business must have a minimum of 51% ownership stake by a person or persons who are considered a member of a minority group. This would include: African-Americans, Asian Americans, Native Americans, Hispanic Americans and women to name a few communities.
Who qualifies for minority small business loans?
For businesses seeking small business loans designated for minority entrepreneurs they must meet the criteria set by the lender. In addition to meeting a minimum minority owned ownership threshold, businesses may also be required to show the following minimum qualifying criteria: a minimum or maximum yearly revenue as determined by the lender, a minimum credit score and other details as determined by the potential lender.
How do you apply for business loans for minorities?
The loan application process may vary depending on the specific lender that a minority entrepreneur is borrowing from. The following is a general look at the business loan application process
- Decide on the purpose of the loan being requested. Understanding this piece of information will help guide the entrepreneur find the right lending partner.
- Once a lending partner has been decided upon the entrepreneur should do the following:
- Collect all necessary documentation. These documents would include, but aren’t limited to, the following:
- Previous years’ tax returns
- Profit and loss statements
- Proof of collateral depending on the type of loan being requested.
- Be prepared for a credit check. This check could include a hard or soft pull.
- Once an applicant is approved for a loan they should review the loan terms and then use the funds as agreed upon within their loan agreement.
It’s important to note that minority business loans may have a slightly different use case and community focus but the application process would be the same as any loan product
Small Business Grants and Additional Resources for Minorities
There are other funding options that are available to minority businesses. Grant programs are a wonderful way to find funding for specific areas of one’s business. They are very attractive for the following reason: grants do not need to be paid back.
There are numerous national and local programs that have grant programs or offer professional services for free or at minimal cost. These services are usually designed to help business owners gain access to mentorship, funding programs or professional projects that would be difficult to gain access to without guidance and support from an organization advocating on behalf of minority entrepreneurs.
SBA 8(a) business development program-For entrepreneurs looking to gain access to government contracts, the SBA 8 (a) program helps qualified businesses work for the Federal Government through Sole Source Contracts. This allows businesses to avoid going through the bidding process in order to be granted a Federal contract.
SCORE-For first time business owners or owners looking for professional support and mentorship. SCORE connects people with mentors who can help entrepreneurs gain access to business focused support for free. For entrepreneurs looking for a SCORE mentor, they can be found across the US
Small-business grants-Grant funding can be an attractive way to pay for specific components to a business. Grants can be challenging in that they can be a little time consuming to research. But, for entrepreneurs who have a system in place to find and apply for small business grants, this type of funding is a great way to grow a business. Small business grants can be found via the SBA, your local municipality or your state. There are numerous national grants and
Minority Business Development Agency (MBDA)-Starting a business is difficult, dealing with expansion and the growth of a business is even more challenging. MBDA works with entrepreneurs during that expansion and growth season of their business
First Nations Development Institute Grant-Grants issued by the First Nations Development Institute are specifically focused on the economic betterment of Native American communities. With that in mind, businesses that are focused on serving Native American communities are the most likely to win grants issued by this agency.
National Minority Business Council-This non-profit organization helps to connect minority businesses with adjacent professional support. The National Minority Business Council also seeks to create a community ecosystem that provides business support and resources to its members
For minority owned businesses there are numerous resources and opportunities to access the resources needed to grow a business. For companies looking for loans, professional support or grant programs it’s highly likely that there is a program that will fit your business needs.
With the growth of financial institutions that aren’t constrained by tradition, minority business owners have the chance to access lending products that are specifically designed to meet their current needs and help with their business growth